Ontario Tire Stewardship – Tax Court of Canada finds that s. 296(2) required a CRA assessment to take into account unclaimed ITCs for prior stale-dated months

In its December 2013 return, OTS claimed over $16 million in ITCs for the preceding four years, which the Minister denied on the basis that OTS was not engaged in commercial activity. Consequent on the determination in Stewardship Ontario that OTS was engaged in commercial activity, in January 2019, the Minister reassessed OTS to allow the originally claimed ITCs but disallowed an additional claim for over $1 million in ITCs earned in 2012 (the “unclaimed ITCs”) that OTS had realized in August 2018 it had failed to claim in its December 2013 return.

OTS argued that, notwithstanding the four-year limitation in s. 225(4)(b) on carrying forward ITCs, the Minister was required to allow the unclaimed ITCs pursuant to s. 296(2). The Crown, however, contended that s. 296(2) only allowed ITCs that arose in the month of the return in question (December 2013) since s. 296(2)(a) did not include the phrase “or a preceding reporting period.”

In rejecting the Crown’s submission, Visser J. noted that the definition of “net tax” in s. 225(1) (as also used s. s. 296(1)) explicitly provides that net tax for a particular reporting period includes ITCs from preceding reporting periods, and then stated:

Where one provision operates by reference to an already defined term or formula in an earlier section, it is neither necessary nor reasonably expected for Parliament to repeat every detail. Parliament is presumed to avoid superfluous repetition. …

[T]o restrict subsection 296(2) as requested by the Respondent would increase the cascading of GST/HST and undermine the legislative scheme, which promotes registrants’ ability to carry forward and claim ITCs.

Regarding the Crown’s argument that s. 296(4) did not permit a refund for unclaimed ITCs from an earlier reporting period, Visser J. indicated that matters dealing with the collection and reimbursement of tax under the ETA are generally within the jurisdiction of the Federal Court and were outside his jurisdiction, and noted a similar observation in Pawlak.

Neal Armstrong. Summary of Ontario Tire Stewardship v. The King, 2026 TCC 77 under ETA s. 296(2).